If you're managing a healthcare practice in South Dakota, you're dealing with a modified Corporate Practice of Medicine doctrine that creates unique compliance challenges—especially when you're trying to expand or restructure a multi-specialty practice. While South Dakota permits corporate employment of physicians under specific statutory conditions outlined in SDCL § 36-4-8.1, entities directly practicing medicine must maintain 100% licensed professional ownership. This creates structuring considerations that differ significantly from states with more permissive or more restrictive CPOM doctrines.
South Dakota recognizes three primary professional entity types for healthcare organizations: Professional Corporations (PCs), Professional Limited Liability Companies (PLLCs), and Limited Liability Partnerships (LLPs). Each entity type offers distinct governance structures and liability protections while maintaining the core requirement that all owners hold active professional licenses in the same healthcare discipline.
South Dakota maintains a tiered statutory framework for healthcare professional corporations. SDCL Chapter 47-11 governs medical corporations for physicians, SDCL Chapter 47-11D covers physician assistants, SDCL Chapter 47-11E addresses nursing professionals, and SDCL Chapter 47-11F provides a comprehensive unified framework covering multiple healthcare professions and entity types.
The most comprehensive statute, SDCL Chapter 47-11F, establishes naming requirements, professional practice restrictions, and licensure coordination procedures applicable across various healthcare disciplines.
Professional corporation names must end with "Professional Corporation" or the abbreviations "P.C." or "PC" per SDCL 47-11F-11. All officers, directors, and shareholders must hold active licenses pursuant to the applicable chapter of SDCL Title 36, as confirmed by the South Dakota Board of Medical and Osteopathic Examiners. This creates an ownership structure fundamentally different from general business corporations, where licensing status directly impacts corporate governance authority.
PLLCs in South Dakota operate under dual statutory authority. SDCL Chapter 47-11F provides healthcare-specific provisions, while SDCL Chapter 47-34A supplies the general LLC statutory framework. This structure allows PLLCs to benefit from flexible LLC management structures and pass-through taxation while maintaining professional practice restrictions.
PLLC names must include "professional limited liability company" or abbreviations like "Prof. L.L.C.", "P.L.L.C.", or similar variations. SDCL 47-11F-13 prohibits practicing without a license and establishes professional liability requirements that distinguish PLLCs from standard limited liability companies. Members and managers must maintain active professional licensure in the same healthcare discipline, creating the same single-profession ownership requirement as professional corporations.
Healthcare professionals may also form Limited Liability Partnerships under SDCL § 48-7A-1001 et seq. with additional healthcare-specific provisions in SDCL Chapter 47-11F. LLPs offer partnership taxation treatment with limited liability protection for partners not directly involved in malpractice or professional negligence. This structure works particularly well for physician groups seeking to maintain partnership governance while limiting personal liability exposure.
South Dakota enforces a modified CPOM doctrine that creates a middle path between states with absolute prohibitions and those with minimal restrictions. The foundational case Bartron v. Codington County, 68 S.D. 309, 2 N.W.2d 337 (1942) established that corporations cannot practice medicine without a license. However, SDCL § 36-4-8.1 subsequently created statutory exceptions permitting corporate employment of physicians under three critical restrictions.
First, under SDCL § 36-4-8.1, employment agreements may not supplant the independent medical judgment of the physician or physician assistant. Second, agreements may not result in profit by the corporation from the practice of medicine, except for reasonable charges for facilities, equipment, personnel, or administrative services. Third, employment agreements cannot remain effective for more than three years from execution or last renewal, though annual renewal is permitted.
These restrictions permit Management Services Organization (MSO) arrangements where corporations provide administrative, management, and marketing services while physicians maintain clinical autonomy. This structure allows hospitals, health systems, and private equity-backed platforms to employ physicians without violating the Corporate Practice of Medicine doctrine, provided employment agreements comply with the three critical statutory restrictions.
The following table outlines complete formation requirements for South Dakota healthcare professional entities:
All professional entities must register with the South Dakota Secretary of State regardless of profession or entity type. Electronic filing through the Business Services Portal provides immediate processing and avoids the $15 paper filing surcharge that applies only to paper filings.
South Dakota requires both LLCs and corporations (including all healthcare professional entities) to file annual reports with no profession-specific variations. Annual reports are due on the first day of the anniversary month of the entity's formation or qualification in South Dakota. For example, if Articles were filed in March 2025, the annual report is due March 1, 2026, and every March 1 thereafter.
The base filing fee is $70. Late filing incurs an additional $50 penalty (total $125 if delinquent). Paper filings add a $15 surcharge, bringing the total late paper filing cost to $135. You should set calendar reminders at least 30 days before the anniversary month to ensure timely compliance and avoid unnecessary penalties.
Forms are available through the Secretary of State's online filing portal. Required information includes the business ID number, legal name, jurisdiction, principal executive office address, registered agent information, names and addresses of principal officers and directors, and authorized signature. You can complete most filings in under 10 minutes if you maintain current information with the Secretary of State.
South Dakota imposes no franchise tax or business privilege tax on healthcare professional entities. The South Dakota Department of Revenue only imposes franchise tax on financial institutions, which does not apply to healthcare professional entities.
Health services provided by licensed practitioners are exempt from state and municipal sales and use tax per the Department of Revenue Health Services fact sheet. This exemption covers physicians, dentists, chiropractors, nurses, and other licensed healthcare professionals, as well as services provided by clinics, hospitals, and laboratories. However, medical expert consulting and testimony services are taxable unless directly related to diagnosis or treatment.
House Bill 1135 (2023) introduced licensing requirements for pharmacy benefit managers. Senate Bill 64 (2024) revised EMS personnel regulation and licensure qualifications. Senate Bill 158 (2025) addresses healthcare service preauthorization requirements. House Bill 1016 (2025) revised pharmacy licensing provisions. House Bill 1024 (2026) modified ambulance operator licensing.
Notably, no modifications were made to entity formation requirements, annual compliance obligations, or corporate practice doctrine during 2023-2026.
The South Dakota Board of Medical and Osteopathic Examiners oversees physician licensing with a biennial renewal cycle. The renewal fee is $400 every two years, due before the license expiration date. Licenses not renewed before expiration are subject to forfeiture or suspension per South Dakota administrative rules governing license renewal procedures.
South Dakota uniquely imposes no mandatory CME requirements for physician license renewal. According to the Board's official physician licensing page, physicians must "update their continuing education credits" during renewal for documentation purposes only, with no minimum hour requirement enforced by state law. The AMA Ed Hub explicitly confirms there are no state-mandated CME topics or credit hours.
However, you may still face CME requirements from specialty board certifications, hospital credentialing, federal programs (Medicare/Medicaid participation), and malpractice insurance carriers.
Physician license status directly affects healthcare entity compliance under South Dakota's Modified Corporate Practice of Medicine doctrine. Professional medical corporations must comply with requirements in SDCL Chapter 47-11 and SDCL 47-11F, which require that all officers, directors, and shareholders of medical professional corporations maintain active licenses pursuant to the statute. A physician whose license is expired, suspended, forfeited, or otherwise inactive cannot legally serve as an officer, director, or shareholder of a professional medical corporation. The Board of Medical and Osteopathic Examiners enforces these requirements to ensure compliance with South Dakota's prohibition on corporate practice of medicine while permitting physician-owned professional entities.
If any single officer, director, or shareholder allows their physician license to lapse, the entire corporate entity may be in violation of state law. This creates entity-wide compliance risk and requires healthcare organizations to implement biennial monitoring to ensure all physician-owners maintain active licensure throughout the two-year renewal cycle.
South Dakota prohibits multi-discipline co-ownership of healthcare professional entities. According to the South Dakota Board of Medical and Osteopathic Examiners, all officers, directors, and shareholders must be licensed physicians, restricting medical professional corporation ownership exclusively to licensed physicians. Similarly, the South Dakota Board of Nursing states that nursing professional service corporations must be formed by licensed nurses actively practicing nursing in South Dakota.
Under South Dakota law, healthcare professional entities are limited to single-profession ownership, which means physicians and nurse practitioners cannot co-own a single PC or PLLC. Healthcare organizations seeking to operate multi-specialty practices must structure separate legal entities for each profession or utilize MSO arrangements where a management company provides administrative services to separately owned professional entities.
Can a hospital or health system directly employ physicians in South Dakota?
Yes, under specific statutory conditions. SDCL § 36-4-8.1 permits corporate employment of physicians provided agreements meet three requirements: they may not supplant the physician's independent medical judgment, they may not result in corporate profit from the practice of medicine (except reasonable charges for facilities and administrative services), and they cannot remain effective for more than three years without renewal. This statutory exception allows hospitals and health systems to employ physicians while maintaining CPOM compliance.
What happens if a physician's license lapses and they are a shareholder in a professional corporation?
License lapse creates immediate entity compliance risk for medical professional corporations. South Dakota requires all officers, directors, and shareholders of professional medical corporations to maintain active medical licenses per the South Dakota Board of Medical and Osteopathic Examiners requirements and SDCL Chapter 47-11. If a physician-shareholder's license expires, becomes suspended, or is otherwise inactive, the entire corporation may violate SDCL Chapter 47-11 requirements. The affected physician must either immediately renew their license or divest their ownership interest to restore compliance.
Are annual reports required for healthcare professional entities in South Dakota?
Yes. All healthcare professional entities (PCs, PLLCs, and LLPs) must file annual reports with the Secretary of State. Reports are due on the first day of the anniversary month of formation with a $70 filing fee. Late filing incurs an additional $50 penalty. There are no healthcare-specific variations or exemptions from annual report requirements. Electronic filing through the Business Services Portal provides the most efficient compliance method.
Should I form a Professional Corporation or a Professional Limited Liability Company?
Both entity types require 100% licensed professional ownership and single-profession ownership structures. Professional Corporations (PCs) follow corporate governance with directors, officers, and shareholders. Professional Limited Liability Companies (PLLCs) offer flexible management structures with member-managed or manager-managed options per SDCL 47-11F. Both entity types provide liability protection for professional negligence, though neither protects against personal malpractice liability. Regarding taxation, both PCs and PLLCs follow similar tax treatment frameworks under South Dakota law. Many healthcare professionals prefer PLLCs for governance flexibility, but you should make the choice in consultation with legal counsel and tax advisors based on your specific organizational needs and professional licensure requirements.
Can physicians and physician assistants co-own a professional entity in South Dakota?
No. South Dakota prohibits multi-discipline co-ownership of healthcare professional entities. Physicians and physician assistants are governed by separate statutory frameworks—physicians under SDCL Chapter 47-11 and physician assistants under SDCL Chapter 47-11D—and each profession must maintain 100% ownership of their respective entities. All officers, directors, and shareholders must be licensed practitioners of the same profession. Healthcare organizations seeking to operate with both professions can utilize MSO arrangements where separate professional entities contract with a common management services organization for administrative functions.
Managing entity compliance across formation requirements, annual reports, professional licensing coordination, and ownership structure monitoring creates ongoing administrative burden that diverts attention from patient care.
Discern automates South Dakota healthcare entity management so you can focus on growing your practice instead of tracking compliance deadlines. Our platform centralizes registered agent coordination, monitors anniversary-month filing deadlines for annual reports, tracks professional licensing renewals across all physician-owners, and maintains real-time visibility across multiple entities.
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